Research KANSAS CITY 3Q17 INDUSTRIAL MARKET. Current Conditions

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1 4.6 Million Square feet of Net Absorption YEAR TO-DATE The Kansas City industrial market continued its strong growth into the third quarter of 2017, as 1.6 million square feet of net absorption was posted. Average quoted rents increased from $4.75/SF to $4.80/SF. A total of 1.6 million square feet of space was delivered to the market during the quarter, while projects under construction remained significant, with 5.5 million square feet of product planned for delivery. Overall vacancy remained flat from the prior quarter at 5.9%. Horizon Global and BMS Logistics Commit to Nearly 1.0 Million Square Feet The Kansas City metro received two major tenant commitments in the third quarter from Horizon Global Corporation and BMS Logistics, Inc. Global Horizon announced it will occupy the entire 512,000-square-foot Inland Port XXII distribution center in Edgerton, Kansas. Located within Logistics Park Kansas City, Inland Port XXII was built on a speculative basis and was selected by Global Horizon because of the logistical advantages Kansas City offers. The company is expected to create approximately 120 new jobs. In the Northland, BMS Logistics announced it will occupy the entire 432,650-square-foot LogisticsCentre IV distribution center in Kansas City, Missouri. Located near the Kansas City International Airport, LogisticsCentre IV is the third facility constructed within the 687-acre master-planned Kansas City Intermodal BusinessCentre. Delivering to the market in 2016, LogisticsCentre IV was also built on a speculative basis and was selected by BMS for the dynamic transportation network the location provides. 10-Year Development Plan will Bring over 600,000 Square Feet to Lee s Summit For a submarket with limited industrial options, plans were well-received when The Grove in Lee s Summit announced it would bring 602,000 square feet of light industrial and flex space to the market within the next 10 years. The Grove, located on 85 acres southeast of the interchange at Missouri Highway 291 and U.S. Highway 50 near Bailey Road, will be a $220 million mixed-use master development expected to bring nearly 1.3 million square feet of product to the market. In addition to the industrial space, the development will bring an estimated 690,225 square feet of residential, office and retail offerings. Developers have officially broken ground on the first property in the development, a 200,000-square-foot speculative industrial facility that can accommodate tenants needing as little as 20,000 square feet. The facility will be suitable for light manufacturing, warehousing and distribution purposes and offers space at $5.50/SF on a triple net basis. Odyssey Real Estate Capital Acquires Seven-Building Portfolio A seven-building, multi-tenant portfolio traded in late September from Colony Northstar, Inc. to Odyssey Real Estate Capital. Located in Executive Park, Current Conditions million SF of net absorption year-to-date. Horizon Global and BMS Logistics commit to 944,650 SF. The Grove in Lee s Summit breaks ground on 200,000 SF speculative light industrial facility. Odyssey purchases 210,773 SF, seven-building portfolio. Colony purchases five-building portfolio for $37.2 million. Orizon Aerostructures to occupy 205,110 SF in Olathe. Market Analysis Asking Rent and Vacancy $6.0 $5.5 $5.0 $4.5 $4.0 $ % 3Q07 3Q08 3Q09 3Q10 3Q11 3Q12 3Q13 3Q14 3Q15 3Q16 3Q17 Net Absorption Square Feet, Millions Q07 3Q08 3Q09 3Q10 3Q11 3Q12 3Q13 3Q14 3Q15 3Q16 3Q17 Market Summary Average Asking Rent (Price/SF) Vacancy (%) Current Quarter Prior Quarter Year Ago Period 8.5% 7.5% 6.5% 5.5% 4.5% 12 Month Forecast Inventory 278MSF 277MSF 270MSF Vacancy Rate 5.9% 5.9% 5.6% Quarterly Net Absorption 1,615,247 1,515,727 3,550,547 Average Asking Rent $4.80 $4.75 $4.66 Under Construction 5,456,516 6,441,845 10,296,527 Deliveries 1,588,783 1,814, ,413

2 the 210,773-square-foot light industrial portfolio is another key acquisition for Odyssey. Newmark Grubb Zimmer has been hired on behalf of the ownership to provide leasing and management services. Colony NorthStar, Inc. Purchases Five-Building Portfolio in Lenexa Sales activity remained strong for Johnson County, Kansas, as Los Angeles-based real estate investment trust Colony NorthStar, Inc. purchased a five-building industrial portfolio totaling 594,380 square feet. Included in the sale were four properties comprising the 419,320-squarefoot, Class B Lackman Business Center located near Interstate 435 and Lackman as well as the 175,060-square-foot, Class B Crossroads Distribution Center located at Strang Line Road in Lenexa, Kansas. The portfolio was sold by Atlanta-based Invesco for approximately $37.2 million, or $63/SF. At the time of sale, the fivebuilding portfolio had 157,650 square feet of availability, equating to 26.5% total vacancy. 56 Commerce Center Receives a 205,110-Square-Foot Commitment as a Second Facility Begins Construction 56 Commerce Center in South Johnson County received a major tenant commitment in third-quarter 2017 from aerospace subassembly manufacturer Orizon Aerostructures, Inc. The locally based company will occupy the entire 205,110-square-foot, Class A industrial facility located at 1001 West Old U.S. 56 Highway in Olathe, Kansas. The building delivered to the market in first-quarter 2017 and was built on a speculative basis. To assist in relocating from its current 70,000-squarefoot facility in North Kansas City, Missouri, Orizon Aerostructures received local and state-level incentives; it is expected to create between 100 and 200 new jobs over the next few years. A second facility at 56 Commerce Center has begun construction on a speculative basis. The 230,120-square-foot building will feature 32-foot clear heights and is expected to deliver by May THE SHARP PACE OF NET ABSORPTION HAS BEGUN TO SLOW, BUT NEW PRODUCT CONTINUES TO DELIVER TO THE MARKET The Kansas City industrial market continues to expand, as positive net absorption has occurred in 24 out of the past 26 quarters. The sharp pace of net absorption has begun to slow, but new product continues to deliver to the market, slightly outpacing demand. With today s aggressive property tax abatement structures, a variety of concessions including free rent, higher tenant improvement allowances and an assortment of modern facilities in the market, there are indicators of a shift in favor of a tenant s market. Expect landlords to continue with stiff competition for local and national credit tenants to fill speculative and newly-constructed product. Vacancy should hold steady near 6.0% through the rest of 2017, as a portion of the 5.5 million square feet of product currently under construction delivers to the market. Lease/User Transactions Tenant Building Submarket Type Square Feet Horizon Global Corp W 193 rd St South Johnson County New 512,000 BMS Logistics, Inc NW Transcon Dr Northland New 432,650 Lineage Logistics TBD (New Century AirCenter) South Johnson County New Construction 400,000 Orizon Aerostructures, Inc W Old US 56 Hwy South Johnson County New 205,110 Dejana Truck & Utility Equipment SubTropolis Northland New 90,000 X Tec Repair, Inc Lackman Rd South Johnson County Renewal 54,360 Select Sales Transactions Building Submarket Sale Price Price/SF Square Feet Multi Prop (5) Lackman Bus Ctr North & South Johnson County $37,150,000 $63 594, Fairfax Tfwy Wyandotte County $1,200,000 $11 106, N Century Dr East Jackson County $2,500,000 $41 61, Division St Wyandotte County $1,050,000 $42 25, E 123 rd St South Johnson County $1,325,000 $102 13,000 2

3 Submarket Statistics Submarket Cluster Downtown Building Type Inventory (SF) Under Construction (SF) Vacancy Rate Qtr. Absorption (SF) YTD Absorption (SF) Asking Rent Industrial Gross (Price/SF) Asking Rent Triple Net (Price/SF) Asking Rent (Price/SF) 13,030, % -170, ,956 $2.71 $11.29 $9.76 Warehouse 12,513, % -171, ,206 $2.71 $11.29 $9.76 Flex 516, % 1,250 1, East Jackson County 66,170, % 77, ,925 $2.83 $4.74 $4.59 Warehouse 47,367, % 89, ,510 $2.97 $3.90 $3.85 Flex 1,635, % -11,326-20,585 $4.96 $8.08 $8.08 Underground 17,167, % 0 106,000 $ Midtown 8,908, % 56,906 70,839 $4.44 $7.15 $5.37 Warehouse 6,057, % 47,779 91,373 $4.13 $7.15 $5.37 Flex 1,514, % 0-14,834 $ Underground 1,336, % 9,127-5,700 $ North Johnson County 25,335, % -225,456-93,593 $5.58 $5.52 $6.22 Warehouse 20,358, % -116, ,395 $5.33 $5.44 $6.15 Flex 2,177, % 19, ,802 $8.42 $9.41 $7.81 Underground 2,800, % -129,000-60,000 $ Northland 54,719,190 1,440, % 378,829 1,083,746 $3.79 $4.45 $4.44 Warehouse 45,614,467 1,440, % 308,509 1,217,595 $4.15 $4.34 $4.37 Flex 1,054, % 67,424 15,296 $6.61 $11.96 $11.96 Underground 8,050, % 2, ,145 $2.45 $5.25 $2.55 South Jackson County 25,023,333 41, % 268, ,625 $7.44 $5.04 $4.79 Warehouse 23,779, % 268, ,290 $7.23 $4.70 $4.08 Flex 1,244,290 41, % 555-2,665 $9.54 $7.24 $7.24 South Johnson County 43,706,326 3,119, % 88,524 1,667,481 $4.47 $4.49 $4.60 Warehouse 40,522,330 3,119, % 138,975 1,715,406 $4.43 $4.32 $4.36 Flex 3,183, % -50,451-47,925 $10.50 $10.29 $10.31 Wyandotte County 41,531, , % 1,140, ,898 $3.96 $5.87 $6.07 Warehouse 40,737, , % 1,135, ,472 $3.75 $5.87 $6.07 Flex 794, % 5,213 2,426 $ Kansas City Market 278,425,946 5,456, % 1,615,247 4,590,965 $3.79 $4.67 $4.80 Warehouse 236,949,650 5,415, % 1,699,620 4,639,045 $3.85 $4.48 $4.60 Flex 12,121,501 41, % 32,604 60,765 $7.20 $8.95 $8.89 Underground 29,354, % -116, ,845 $5.25 $2.55 $2.55 3

4 WAREHOUSE - Statistics by Submarket Under Qtr YTD Asking Rent Asking Rent Inventory Construction Vacancy Absorption Absorption Industrial Gross Triple Net Asking Rent (SF) (SF) Rate (SF) (SF) (Price/SF) (Price/SF) (Price/SF) Downtown 12,513, % -171, ,206 $2.71 $11.29 $9.76 East Jackson County 47,367, % 89, ,510 $2.97 $3.90 $3.85 Midtown 6,057, % 47,779 91,373 $4.13 $7.15 $5.37 North Johnson County 20,358, % -116, ,395 $5.33 $5.44 $6.15 Northland 45,614,467 1,440, % 308,509 1,217,595 $4.15 $4.34 $4.37 South Jackson County 23,779, % 268, ,290 $7.23 $4.70 $4.08 South Johnson County 40,522,330 3,119, % 138,975 1,715,406 $4.43 $4.32 $4.36 Wyandotte County 40,737, , % 1,135, ,472 $3.75 $5.87 $6.07 Kansas City Market 236,949,650 5,415, % 1,699,620 4,639,045 $3.85 $4.48 $4.60 FLEX - Statistics by Submarket Under Qtr YTD Asking Rent Asking Rent Inventory Construction Vacancy Absorption Absorption Industrial Gross Triple Net Asking Rent (SF) (SF) Rate (SF) (SF) (Price/SF) (Price/SF) (Price/SF) Downtown 516, % 1,250 1, East Jackson County 1,635, % -11,326-20,585 $4.96 $8.08 $8.08 Midtown 1,514, % 0-14,834 $ North Johnson County 2,177, % 19, ,802 $8.42 $9.41 $7.81 Northland 1,054, % 67,424 15,296 $6.61 $11.96 $11.96 South Jackson County 1,244,290 41, % 555-2,665 $9.54 $7.24 $7.24 South Johnson County 3,183, % -50,451-47,925 $10.50 $10.29 $10.31 Wyandotte County 794, % 5,213 2,426 $ Kansas City Market 12,121,501 41, % 32,604 60,765 $7.20 $8.95 $8.89 4

5 Economic Conditions The local economy continued to improve through August, with total employment growth of 1.6% and positive growth occurring in seven out of ten industries, calculated on a 12-month percent change basis. Payroll employment in Kansas City decreased 90 basis points compared to the prior year registering 1.6% in August The national average decreased 30 basis points to 1.5%. Both indices have realized positive 12-month percent changes since August The Consumer Price Index (CPI) for the United States increased 80 basis points to 1.9% over the past year. The Midwest Urban CPI increased 90 basis points to 1.5% in August Unemployment in the United States increased 10 basis points to 4.4% in August, while unemployment in Kansas City remained flat at 3.9% over the past quarter. Unemployment in Kansas City decreased 50 basis points from a year prior. Unemployment Rate Employment By Industry Kansas City, August % 19.8% 14.1% 1.7% 4.0% 4.5% Payroll Employment 12.9% 6.9% 7.4% 10.4% Information Other Svcs Construction/Mining/Logging Manufacturing Financial Activities Leisure/Hospitality Government Education/Health Svcs Prof/Business Svcs Trade/Transportation/Utilities Seasonally Adjusted 10% 8% 7% 5% 4% 2% Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Nonfarm, 12-Month % Change, Not Seasonally Adjusted 4% 3% 2% 1% 0% -1% Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Kansas City United States Kansas City United States Consumer Price Index (CPI) Employment Growth by Industry All Items, 12-Month % Change, Not Seasonally Adjusted, =100 5% 4% 2% 1% -1% -3% Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Midwest Urban United States Kansas City, August 2017, 12-Month % Change, Not Seasonally Adjusted Construction/Mining/Logging Manufacturing Trade/Transportation/Utilities Information Financial Activities Prof/Business Svcs Education/Health Svcs Leisure/Hospitality Other Svcs Government -7.5% -5.0% -2.5% 0.0% 2.5% 5.0% 5

6 Kansas City, MO 1220 Washington Street Suite 300 Kansas City, MO Newmark Knight Frank United States Office Locations Lee s Summit, MO 1485 SW Market Street Lee s Summit, MO St. Louis, MO 8235 Forsyth Boulevard Suite 310 Clayton, MO Salina, KS P.O. Box 3224 Salina, KS Mark C. Long, SIOR, CCIM, LEED AP Executive Managing Director, Principal Kansas City mlong@ngzimmer.com Andrew J. Garten Director, Research agarten@ngzimmer.com Newmark Knight Frank has implemented a proprietary database and our tracking methodology has been revised. With this expansion and refinement in our data, there may be adjustments in historical statistics including availability, asking rents, absorption and effective rents. Newmark Knight Frank Research Reports are also available at All information contained in this publication is derived from sources that are deemed to be reliable. However, Newmark Knight Frank (NKF) has not verified any such information, and the same constitutes the statements and representations only of the source thereof, and not of NKF. Any recipient of this publication should independently verify such information and all other information that may be material to any decision that recipient may make in response to this publication, and should consult with professionals of the recipient s choice with regard to all aspects of that decision, including its legal, financial, and tax aspects and implications. Any recipient of this publication may not, without the prior written approval of NKF, distribute, disseminate, publish, transmit, copy, broadcast, upload, download, or in any other way reproduce this publication or any of the information it contains.